In some breaking news, the Department for Business, Energy & Industrial Strategy has today announced that it is implementing a new law to ensure all furloughed employees receive redundancy payments based on 100% of their normal pay, rather than any reduced furlough rate received under the Coronavirus Job Retention Scheme (CJRS). 

The BBC is also reporting that changes will be made to ensure that an employee’s notice pay during their statutory notice period will also be based on full pay, and not furlough pay. This is also expected to apply to basic awards for successful unfair dismissal claims.

The law is expected to come into force from tomorrow (Friday 31 July).

This amounts to a significant change, particularly for those employees whose earnings fluctuate. At the moment, workers with irregular hours (and therefore fluctuating pay) would normally be entitled to receive a redundancy payment based on their average pay over the previous 12 weeks. If they have been furloughed, this is likely to be much less than 100% of their usual wage.

The Business Secretary, Alok Sharma, has emphasised the importance of redundant employees receiving payments they are rightfully entitled to, and not being “short-changed” during this difficult coronavirus pandemic.

It appears that the proposals will only affect these statutory entitlements and not any additional entitlements derived from the employee’s contract, such as a longer notice period.

We await confirmation of the draft legislation in order to fully understand the implications; in particular, we do not yet know whether this will have retrospective effect.

Either way, this is likely to result in significant additional costs for employers considering redundancies or dismissals more generally over the coming months.